DAN ABRAMS , HOST: A Defense Department contractor pleads guilty to stealing more than two million taxpayer dollars that was supposed to be used to rebuild Iraq. He bought a Porsche, fancy watches and a whole lot more. How does this happen? First the headlines.

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ABRAMS: He was accused of taking millions of taxpayer dollars that were supposed to help rebuild Iraq. Today Robert Stein is facing up to 30 years in prison on a quarter million dollar fine. Stein pled guilty to bribery and conspiracy for stealing more than two million bucks, taking bribes worth more than a million more. But here's what I don't get.

Stein had been convicted of credit card fraud in 1996. Still, he was hired by defense contractor S&K Technologies and made responsible for $82 million in reconstruction funds. According to his plea, Stein had conspired with five Reserve U.S. Army officers to funnel rebuilding projects to a U.S. businessman who allegedly kicked back bribes, tens of thousands in cash, cars, watches, even sexual favors from women in a Baghdad villa. This isn't the only scandal like this out there.

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GINGER CRUZ, COALITION PROVISIONAL AUTHORITY: And we don't believe this will be the last charge that will be brought. We believe that there will be others.

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ABRAMS: Wow. Pratap Chatterjee is a journalist and executive editor of the non-profit group CorpWatch and the author of "Iraq, Inc.: A Profitable Occupation".

Thanks a lot for coming on the program. Appreciate it. All right, I got to ask you the bottom line and it's a broad one, how does this happen?

PRATAP CHATTERJEE, EXEC. DIRECTOR CORPWATCH: Well part of the reason is the U.S. government subcontracted a lot of this work. Almost everything was run by companies. There was no oversight. There was a lot of chaos. And you have to understand it was the middle of a war. So a lot of people either made mistakes.

Other people as in the case of Robert Stein just outright stole money. And as this courts have said (INAUDIBLE) number of these cases, so Stein himself worked for this company, S&K Technologies, but-and they hadn't checked into his background.

ABRAMS: Right.

CHATTERJEE: It was incredibly common. There were people who was hired, private interrogators who were hired to work in Abu Ghraib on the basis of a phone call. No resumes were sent in. People just showed up. If you were in the right place at the right time you got a job...

ABRAMS: Let me ask you about the money, all right. The $82 million, how does that work? I mean does the government say to S&K here's $82 million. We need you to basically go build a school and a couple of other things and then get back to us or is there someone who's supposed to be watching exactly what happens to that money?

CHATTERJEE: Well it's a little complex, but let me break it down this way. He worked for S&K Technologies and he worked-and his job was to work for the Coalition Provisional Authority (INAUDIBLE) so S&K was not in charge of $82 million.

ABRAMS: All right.

CHATTERJEE: And there are rules that are intended to ensure that the money doesn't get wasted. So for example, he was only given authority to spend up to $500,000. So when he wanted to give contracts to his friend Philip Bloom, he broke it up into 11 contracts for $498,000 each.

ABRAMS: But who's watching? I mean I understand that there are ways to get around certain rules, but I just want to know is there supposed to be someone who is assigned to say there is this $82 million out there and there is this guy Stein who is handing it out. Who's watching?

CHATTERJEE: He was the guy in charge of watching how the money was spent. This is-the problem is it oftentimes...

ABRAMS: It's like one of those things where you say I want to talk to the manager and they say you're talking to him.

CHATTERJEE: Exactly. So he had-and this is extremely common. Halliburton, for example, had this guy (INAUDIBLE) working in Kuwait and he was in charge of handing out contracts for fuel supplies. And he got two bids, one for $1.5 million, one for $1.7 million. He altered the contract to make them for five and a half and $6.2 million. And so then headquarters back in Rock Island, Illinois said well we'll take the lower bid for $5 1Ž2 million and then the company kicked him back $1 million. He's now also facing similar charges.

ABRAMS: Here's from the plea. Stein solicited secret employment or potential future employment, business or first-class tickets, watches and other jewelry, alcohol, cigars, sexual favors from women provided by Bloom at his villa in Baghdad and money laundering services.

So, again, what you are telling me is that this individual, who had been a convicted felon for credit card scams, had no one who was assigned to watching how he doled out $82 million of taxpayer money that was supposed to go to rebuilding Iraq?

CHATTERJEE: Well that's not entirely true because there were auditors who were supposed to check on the money...

ABRAMS: So what happened to that?

CHATTERJEE: ... and there was a chain of command, but he was basically the guy-he was the top official in his department, so he was in charge effectively...

ABRAMS: But what about the auditors? What about-why was-I mean is that the way he was ultimately caught?

CHATTERJEE: That is the way-well there were a couple of different ways that people have been caught here. Whistleblowers, people who saw what happened and didn't like what happened and there is a company in Houston, Eagle Global Logistics that was adding money on for shipping to Baghdad and somebody in the company blew the whistle.

ABRAMS: Yes.

CHATTERJEE: So oftentimes it's whistleblowers, people who are not corrupt. And the other problem is of course the auditors do eventually catch up. The money that he was doling out, a lot of this was Iraq's own money. There were less controls on this...

ABRAMS: Right.

CHATTERJEE: ... (INAUDIBLE) money, for example, appropriated by Congress there's a lot more paperwork. This money was kept literally-there was $2 million in bathroom safes. There is a guy, Frank Willis, his job was giving away (INAUDIBLE) company that was in charge of guarding Baghdad airport came and said we need $2 million. He went down to the basement; brought $2 million up in shrink-wrap plastic bricks. There was so much money, Willis told me, they played football with it.

So money was literally spilling all over the place. It's taking this money from Saddam Hussein's safes. They had gotten money from Iraq's oil revenues. They were shipping $2 billion in one day from New Jersey of Iraq's oil revenues...

ABRAMS: Wow.

CHATTERJEE: ... to Iraq and at one point one of the officials said look, next week there is a Monday holiday. Why don't you send me $3 billion? The Treasury officials in charge...

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CHATTERJEE: ... said is a little extra change, an extra $1 billion.

This is the largest sum of money...

ABRAMS: Unbelievable.

CHATTERJEE: ... moved in history.

ABRAMS: All right. Well look, it's a good thing this guy got caught. Hopefully, it will send a message to some of these other people out there who will say oh boy, they're going to catch us, but we will see. All right. Pratap Chatterjee thanks a lot for coming on the program.

CHATTERJEE: Thanks for having me, Dan.

ABRAMS: Appreciate it.

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